Opinion
No. 15–P–791.
12-09-2016
BOTELLO LUMBER CO., INC. v. APCON, INC. & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This case arises from a dispute concerning the construction of a single family home. Following a jury trial in the Superior Court, judgment entered in favor of the contractor, Apcon, Inc. (Apcon), against the homeowner, Susan B. Ware (Ware). Ware's appeal from the judgment brings up two issues: (1) whether the trial judge erred in denying her motion for a directed verdict, and (2) whether the judge erred in employing a form of judgment that calculated prejudgment interest unfavorably to Ware. We conclude that the judge did not err in denying Ware's motion for a directed verdict; however, we further conclude that the form of judgment resulted in an erroneous computation of prejudgment interest, to Ware's detriment. We therefore vacate the judgment dated December 30, 2013, and remand for entry of a corrected judgment, nunc pro tunc.
Ware's notice of appeal, dated March 5, 2014, does not claim an appeal from the order of February 13, 2014, denying her posttrial motions. Our review is therefore limited to issues arising from the judgment. See Robinson v. Boston, 71 Mass.App.Ct. 765, 771 (2008).
Apcon purports to cross appeal from an order denying its motion to correct the amount of interest included in the judgment. However, the cross appeal is not properly before us, as it was not docketed nor was the filing fee paid. Regardless, Apcon's argument with respect to the calculation of interest is without merit, because Apcon failed to obtain a finding as to the date of breach or demand. Accordingly, the use of the date of the cross claim was not error. See Deerskin Trading Post, Inc. v. Spencer Press, Inc., 398 Mass. 118, 125 (1996) ; Pettingell v. Morrison, Mahoney & Miller, 426 Mass. 253, 259 (1997) (using date of counterclaim for prejudgment interest calculation); Aimtek, Inc. v. Norton Co., 69 Mass.App.Ct. 660, 668 (2007).
Background. This case originated as a collection action brought by a material supplier, Botello, against Apcon and its principal, Michael Santos. In connection with requesting a mechanic's lien, Botello also named Ware and her husband, Henry Ware III, as defendants. Ware and Apcon then asserted cross claims against each other. Shortly before trial, Botello's claim against Ware settled on terms that included the assignment of Botello's claim against Apcon to Ware. Thus, the case proceeded to trial as a dispute between Ware and Apcon. At issue were Ware's claims against Apcon for breach of the construction contract and violation of G.L. c. 93A; Apcon's claims against Ware for breach of the construction contract and breach of the implied covenant of good faith and fair dealing; and Ware's claim (as assignee) for money owed by Apcon to Botello.
Henry Ware III died prior to trial. Where temporally appropriate, references herein to Susan Ware include her husband.
The essential facts and contentions presented to the jury were as follows. In September, 2008, Apcon and Ware entered into a contract, drafted by Ware, for the construction of a residence on land long-owned by the Ware family. The house, which was designed to be energy efficient and accessible to persons with mobility issues, had a number of special "high-tech" features. For its work, Apcon was to receive the lump sum of $786,118.
For various reasons, the project did not go smoothly, and, on June 17, 2009, Ware terminated the contract as authorized by Article 21 of the contract. Also in accordance with Article 21, Apcon submitted a request for payment of $176,285.20 for work completed through the date of termination. Ware denied that she owed Apcon any money, claiming that Apcon had not complied with conditions for "final payment" set forth in two other provisions of the contract, Article 5 and Article 13.3. In addition, Ware claimed that she was entitled to recover from Apcon $182,371.16 for costs incurred above and beyond the contract price in order to complete the project.
Article 21, entitled "Termination by Owner," states: "Owner may, at any time and for any reason, in his sole discretion, terminate the Contract and take possession of the site and the materials then on the site, and may finish the Work by whatever method he may deem expedient, and if such expense exceeds such unpaid balance, Contractor shall pay the difference to Owner. In case of such termination by Owner, Contractor shall submit a final Application for Payment for sums due Contractor for work completed through the date of termination, and upon Owner's payment of such final bill (less any allowable offset, deduction, holdback, or adjustment), Contractor shall be without further legal remedy or recourse."
Article 5, entitled "Final Payment," states: "Owner shall make final payment fifteen days after completion of the Work, provided that the Contract be then fully performed, subject to the Provisions of Article 13 of the General conditions, and proof of payment of all Subcontractors and suppliers having been provided."
Article 13.3, in a section entitled "Payments," states: "Final payment shall not be due until Contractor has delivered to Owner a complete release of all liens arising out of this Contract or receipts in full covering all labor, materials and equipment for which a lien could be filed, or a bond satisfactory to Owner indemnifying him against any lien."
At the conclusion of the evidence, the judge directed a verdict in Apcon's favor on Ware's claim under c. 93A. It was agreed that the remainder of the case would be submitted to the jury on special questions, see Mass.R.Civ.P. 49(a), 365 Mass. 812 (1974), except for the assigned claim, which was resolved by stipulation. The parties stipulated that, as of June 17, 2009, Apcon owed Botello the amount of $73,019.18, and, pursuant to the assignment from Botello to Ware, that amount was now payable by Apcon to Ware. The jury were informed of the stipulation and were told to include that amount in any damages that they might award to Apcon. It was the intention of the parties and the judge that the amount owed to Ware on the assigned claim would be deducted from any award to Apcon when the case went to judgment, and that even if Apcon received no award, Ware still would be entitled to recover on the assigned claim.
Unlike the assigned claim, the parties' cross claims were addressed specifically in the special questions. The jury found that Apcon had not breached either of the contractual provisions relied upon by Ware. The jury found further that it was Ware who had breached the contract by failing to pay money owed to Apcon, and that Ware also had breached the covenant of good faith and fair dealing in terminating Apcon. Finally, the jury found that the amount of damages owed by Ware to Apcon was $150,000.
Based upon these findings, the judge fashioned a two paragraph judgment. The first paragraph concerned Apcon's claims against Ware. It provided that Apcon recover of Ware the base sum of $76,980.82, plus statutory interest from March 23, 2010 (the date Apcon filed its cross claim against Ware) to December 30, 2013 (the date of judgment). The judge arrived at the base sum by deducting the $73,019.18 stipulated to be owed by Apcon to Ware on the assigned claim, from the $150,000 found by the jury to be owed by Ware to Apcon for breach of contract and/or breach of the covenant of good faith and fair dealing. The second paragraph concerned Ware's claim against Apcon. It provided that Ware take nothing of Apcon on her claim for breach of contract, and that this claim be dismissed.
Discussion. 1. Apcon's breach of contract claim. The jury found that Ware breached the contract by failing to pay Apcon for work that it performed before termination, in accordance with Article 21. Ware now argues that she was entitled to a directed verdict on this claim, because Apcon failed to prove that it had satisfied two contractual prerequisites to receiving final payment—making payment to all subcontractors and suppliers, as required by Article 5, and delivering a complete release of all liens, as required by Article 13.3.
Ware's premise is that Articles 5 and 13.3 applied even though the contract had been terminated unilaterally under Article 21; however, the interrelationship of these provisions was ambiguous, at best. Although the judge did not expressly find the contract to be ambiguous, he did so implicitly. This is reflected in his colloquy with counsel and also in his jury instructions on construing ambiguous terms, including the canon that ambiguities are construed against the drafter. See Quinn v. Mar–Lees Seafood, LLC, 69 Mass.App.Ct. 688, 695 (2007) (implicit finding of ambiguity where issue was submitted to jury).
The evidence was undisputed that the contract had been prepared by Ware; thus, the jury were entitled to interpret any ambiguities against her. In so doing, the jury reasonably could find that Articles 5 and 13.3 related only to final payment after completion of the work and not to payment sought under Article 21 after termination by the owner. Evidence consistent with this view included Santos's testimony about making his final application for payment under Article 21 and not Article 13.3, and his written application for payment citing Article 21. The jury were free to credit this evidence in interpreting the contract. See Brewster Wallcovering Co. v. Blue Mountain Walcoverings, Inc., 68 Mass.App.Ct. 582, 598 (2007).
Ware argues further that, under Article 21, any amount owed to Apcon for work completed should have been offset by costs incurred in excess of the contract price to complete the construction. However, even though Ware introduced receipts showing expenditures above the contract price, there also was evidence that Ware paid more than was necessary to complete the work. The jury were given significant latitude, without objection from either side, to determine not only the meaning of contract terms, but also the amount of damages. They were free to credit or discredit the evidence before them. Notably, although they found in favor of Apcon, they did not award Apcon all of the damages it claimed, suggesting that they carefully weighed and considered the evidence.
In sum, there is no merit to Ware's argument that Apcon's breach of contract claim failed as matter of law.
The jury also found in Apcon's favor on its related claim for violation of the covenant of good faith and fair dealing by terminating the contract. See Winchester Gables, Inc. v. Host Marriott Corp., 70 Mass.App.Ct. 585, 597 (2007). Ware argues that this claim should not have gone to the jury because Article 21 gave the owner the right to terminate the contract at any time and for any reason. Because the jury were asked to determine the single sum of damages that Apcon sustained as a result of breach of contract "and/or" breach of the covenant of good faith and fair dealing, we need not consider this issue. Apcon's damages were identical on either theory, and the jury's finding on the breach of contract claim suffices to support the award.
2. Ware's breach of contract claim. The jury found in favor of Apcon on Ware's claim that Apcon breached Article 24 of the contract by failing to bond or discharge three liens that had been placed on the property. Ware now argues that this claim should not have gone to the jury because it was undisputed that Apcon had failed to bond the liens, and no reasonable jury could find otherwise.
Ware's argument is flawed if only because there was evidence establishing that all three liens were placed on the property after Ware invoked Article 21 to terminate the contract. The jury reasonably could conclude that in light of the intervening termination, Apcon no longer was required to perform under Article 24.
3. Prejudgment interest. Ware argues that she was entitled to prejudgment interest on the assigned claim at eighteen percent, compounded, as set forth in the contract between Botello and Apcon, and that the manner in which the case was reduced to judgment resulted in a miscalculation of prejudgment interest, to her detriment. We agree that Ware was entitled to prejudgment interest, but not at the rate provided in the contract. Just as Apcon did not obtain a finding as to the date of breach or demand, see note 3, supra, Ware did not request or obtain a finding as to the contractually prescribed interest rate. Accordingly, she is entitled only to prejudgment interest at the statutory rate of twelve percent. G.L. c. 231, § 6C, as amended through St 1993, c. 110, § 224 (damages in contract actions accrue interest "at the contract rate, if established, or at the rate of twelve per cent per annum from the date of the breach or demand," and "[i]f the date of the breach or demand is not established, such interest shall be added ... from the date of the commencement of the action").
Although Apcon argues that Ware failed to preserve this issue, the record reflects Ware's consistent assertion, from the first day of trial up to and including argument and filings on the appropriate form of judgment, that she was entitled to prejudgment interest on this basis.
That said, Ware is correct that the judge's manner of calculating prejudgment interest shortchanged her. The judge first subtracted the damages stipulated to be due to Ware on the assigned claim from the damages found by the jury to be due to Apcon. The judge ordered that Apcon obtain prejudgment interest on the difference, at twelve percent, from the date that Apcon filed its cross claim against Ware until the date of judgment. Had Apcon filed its cross claim on the same date that Botello filed its complaint, this approach would have been correct as to both parties. However, because Botello's pleading was filed several months before Apcon's cross claim, this method deprived Ware of the additional interest that accrued on the assigned claim during those months. The judge should have applied prejudgment interest to Apcon's claims and, separately, to Ware's, and then issued a judgment in Apcon's favor for the difference between those amounts.
We therefore vacate the judgment dated December 30, 2013, and remand for the entry, nunc pro tunc, of a corrected judgment of the same date. The corrected judgment shall reflect that Apcon is entitled to recover from Ware the amount of $150,000, plus statutory interest from March 23, 2010 to December 30, 2013; and that Ware is entitled to recover from Apcon the amount of $73,019.18, plus statutory interest from October 19, 2009 to December 30, 2013. Judgment shall enter in Apcon's favor on the resulting difference between these amounts.
We strongly suggest that the parties endeavor to agree on these calculations and on a form of judgment to provide to the court.
So ordered.